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European Integration and FDI Location: Is there a Border Effect within the Enlarged EU?

Lookup NU author(s): Ilona Serwicka, Dr Jonathan JonesORCiD, Professor Colin Wren

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Abstract

This paper examines how integration affects Foreign Direct Investment location in relation to a newly-internalised border. It focuses on the fifth European Union enlargement that integrated the Central and Eastern European Countries. Using a spatial autoregressive model, 35,103 FDI location decisions are analysed for Europe at a NUTS-2 regional level over 1997-2010. It finds no distance effect in FDI location prior to enlargement, but after this time FDI is 37% higher in the CEEC regions that are contiguous with the newly-internalised border. This is not explained by a national border effect that occurs throughout the union, nor by a drop in FDI in the border regions of the old Member States, but rather it is consistent with improved market access from the removal of the border checks. Along the internalised border it amounts to an extra 60 FDI projects and 13,600 gross jobs per annum, which is up to 2,000 investments in the long-run. The results have implications for the economic development and cohesion of the enlarged union

Publication metadata

Author(s): Serwicka IE, Jones J, Wren C

Publication type: Article

Publication status: Published

Journal: Annals of Regional Science

Year: 2024

Volume: 72

Pages: 85-106

Print publication date: 01/01/2024

Online publication date: 02/12/2022

Acceptance date: 27/10/2022

Date deposited: 12/12/2022

ISSN (print): 0570-1864

ISSN (electronic): 1432-0592

Publisher: Springer Nature

URL: https://doi.org/10.1007/s00168-022-01190-2

DOI: 10.1007/s00168-022-01190-2

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